The Real Risks of Amnesty

American competitiveness and educational achievement are the worry, not an increased threat to national security

By HEATHER MAC DONALD

The proponents of the Senate immigration amnesty bill are right about one thing: The recent Boston mayhem is largely irrelevant to immigration reform. It’s unrealistic to think that immigration officials should have divined the young Tsarnaev brothers’ future homicidal plans when the family’s asylum application was accepted in 2002 or even in 2007, when family members gained legal permanent-resident status. Perhaps the FBI’s interview with Tamerlan Tsarnaev in 2011 for possible connections to Chechen terrorists should have stalled his younger brother Dzhokhar’s receipt of U.S. citizenship in 2012, but at least the Department of Homeland Security put Tamerlan’s own citizenship application on hold for further review, in light of the earlier FBI inquiry. If there was a government failure here, it would appear to have been the FBI’s, not the DHS’s, but more facts need to come out before reaching even that conclusion.

True, the asylum and refugee programs—a relatively small subset of legal immigration—suffer from fraud, but that fraud overwhelmingly consists of faking a basis for asylum, not covering up terrorist intentions. We can expect fraud to be an enormous problem in the proposed amnesty process, as it was in the 1986 amnesty, but it, too, will be largely concerned with manufacturing eligibility rather than with concealing terror plans. There is plenty to scrutinize in the Senate’s bill without alleging an exaggerated risk of terrorism, and it would be a mistake for skeptical senators to make national security a centerpiece of their inquiry. As horrific as every terror attack is, the incidence of domestic terrorism and the percentage of immigrants who commit it remain extremely low. The risks in the proposed amnesty law relate rather to America’s core immigration problem: the mass illegal entry of uneducated, unskilled aliens who pose no terror threat but who have a concrete effect on our educational and economic competitiveness.

Utopian Union Fantasy

California Vs Algebra

By Ed Ring.

“Jennifer Muir, a spokeswoman for the Orange County Employees’ Association, which represents more than 18,000 public employees in Orange County, said the California Public Policy Center’s study was a politically motivated attack on public employees and unions. Aside from promoting the center’s anti-public employee union agenda, Muir said, the reports are misleading and shift focus away from the discussions that matter most. Union leaders have long urged for people to consider the possibility that private-industry employees are being undercompensated and should receive retirement benefits and health coverage.”

Orange County Register, April 19, 2013

The study Muir refers to, entitled “Irvine, California – City Employee Compensation Analysis,” was published on April 8th, 2013, by our parent organization, the California Public Policy Center. To call this study “a politically motivated attack on public employees and unions,” as Muir alleges, is itself a distraction. It’s easy, and necessary, to impugn the motives behind information when the information itself is so embarrassing.

Orwell does America

Everyone still has the right to go out shopping

By Pepe Escobar 

Welcome to the sweet abyss of an Orwellian vortex. 2013 increasingly looks like 1984. 
In two previous articles, for RT RT and for Asia Times Online I have looked into the superimposed levels of blowback implied by the Boston bombing.
With still so many unanswered questions regarding what took place on the ground in Boston after the bombing, it's time to look at an extra, possible Top Ten list of lingering absurdities. And this without sidestepping other unanswered crucial questions, such as why a bomb drill - organized by Craft - was going on during the marathon at which the bombing took place; and why it was vehemently denied that a bomb drill was going on. For this current set of questions, I'm grateful for the help of Asia Times Online's Bostonian readers.

Pick your Mercedes 

1. Will the FBI come clean and admit they knew everything there is to know about Tamerlan Tsarnaev - after five years of monitoring/controlling him - and still lied to public opinion by swearing they knew nothing about his and his brother's identity, posting their photos and asking for the public to act ''as eyes and ears'' to identify those ''suspects''? 

2. Since 9/11, the preferred FBI modus operandi is to use informants to lure ''potential'' terra-rists to act. See for example the Fast and Furious-style Iran cum Mexican cartel plot. There's a strong possibility the Tsarnaev brothers were set up. In this case, is there anyone anywhere among the vast US intel apparatus investigating the FBI investigators?

3. Will the FBI explain a tsunami of false reports by the usual, anonymous ''US officials'' of explosions or ''unexploded bombs'' - at two Boston hotels, a court house, and at the JFK library? 

4. A Saudi student, injured at the bombing, who was in the US via a legal student visa, is suddenly deported on ''national security grounds'', even as investigators found ''unusual burns'' on his hand inconsistent with the injuries of other victims. He may have been a member of a Saudi clan notorious for its al-Qaeda connections. The FBI ''investigation'' is suddenly dropped shortly after the Saudi ambassador in the US held an unscheduled meeting with President Barack Obama. Add to it that even before the smoke had cleared, the Israel Lobby and the notorious disinformation website DEBKA were pointing their fingers at ''domestic terrorists with Middle East connections''. 

5. The description of the car hijacked by the brothers, a Mercedes E350 SUV, matches the description of their car left at a service station in Cambridge for two weeks prior to the bombing. A mechanic in Cambridge said Dzhokhar, Tamerlan's brother, picked up his "black Mercedes SUV" on Tuesday, the day after the marathon. The two cars may be one and the same; that blows up the whole official ''carjacking'' narrative.

6. Additionally, there's a media blackout on the owner of the allegedly hijacked Mercedes, who in theory managed to escape and call the police, who maintains that the brothers went to three ATMs and withdrew US$800 from his account - not before telling him they were the ''marathon bombers and had killed an MIT police''. The driver said he was let off at a gas station on Memorial Drive in Cambridge. But some witnesses saw Dzhokhar at the station's convenience store - without any driver. Then the narrative of the brothers robbing a convenience store was revealed to be false. Police scanners referred to a "black top" person. Still, the official narrative is that the Tsarnaev brothers were at the same place and the same time of the robbery.

Italy Led by Letta Brings Berlusconi Back as Winner

An opportunity for Berlusconi to regroup, catch his breath and prepare for the next round of elections

By Andrew Frye & Alessandra Migliaccio
Silvio Berlusconi, the three-time prime minister and two-time convicted lawbreaker, won a path back to power in Italy by outmaneuvering rivals during an eight- week political stalemate.

A year and a half after resigning in near-disgrace, the 76- year-old billionaire became the key figure in talks that began today to form the next Cabinet after the Democratic Party’s Enrico Letta was appointed prime minister. Berlusconi and his 241 lawmakers, the second-biggest contingent, hold the votes Letta, 46, needs to secure a parliamentary majority.

Berlusconi is one of the last of his generation standing after outgoing Premier Mario Monti, 70, was rejected by voters in February and 61-year-old Pier Luigi Bersani was discarded in a Democratic Party mutiny. Berlusconi’s resilience, even as he battles criminal charges from tax fraud to sexual misconduct, has gained him the admiration of allies and adversaries alike.

“Silvio Berlusconi is the real winner,” Nichi Vendola, an opponent and head of the Left, Ecology and Freedom party, said April 20 after the owner of broadcaster Mediaset SpA (MS)laid the groundwork to be part of the governing alliance. Vendola, a Bersani ally, said today he won’t support Letta.

Hizbollah's strategy in Syria will accelerate sectarian war

Lebanese clerics calling for jihad in Syria is only the tip of the iceberg

By Hassan Hassan

Fears that the Syrian conflict may spill over the country's borders are being realised, but in reverse: the Lebanese conflict is coming to Syria.

Ahmed Al Aseer, an influential Lebanese Sunni cleric, declared on Monday that jihad in Syria is now mandatory for all capable Muslims. Sheikh Al Aseer said that the decision was taken after Hizbollah's involvement in Syria became clear.

"We felt that [Hizbollah] was militarily involved and everyone was denying," he said in a video statement posted on YouTube on Monday. "But now that has become clear."

Hizbollah's initial denial of involvement in Syria appears to have changed to justification, primarily because it has become difficult for the group to continue denying reports as an increasing number of dead fighters are sent back from Syria. Although the party's leader, Hassan Nasrallah, admitted in October that party members were fighting alongside the Assad regime, he said those fighters were acting as individuals and not under his orders.

This escalation should not be played down as part of traditional Lebanese sectarian bickering. Hizbollah's decision to openly support the Syrian regime is a serious move that merits a closer look.

The obvious question is, why now?

According to accounts, the party's fighters in Syria are numerous and well-trained. Additionally, the structure of Hizbollah allows it to order the fighters to withdraw if needed.

But why would the party opt to wage war against the people of a neighbouring country that is far larger than Lebanon, offers access to its allies in Iraq and Iran, and most of all, has a vast number of supporters inside Lebanon?

The escalation of Hizbollah's involvement in Homs follows a series of media reports that suggests the party, in coordination with Tehran, has moved aggressively and openly to back the regime of Bashar Al Assad. According to the Kuwaiti newspaper Al Rai, Nasrallah visited Tehran this week and met with Supreme Leader Ayatollah Ali Khamenei and the commander of the Al Quds Brigades, General Qasim Sulaimani.

On Monday, Mr Al Assad expressed resentment towards Lebanon's "dissociation policy" during a meeting with a pro-Hizbollah Lebanese delegation. The Syrian president said: "A person cannot dissociate himself if that person is within a circle of fire and that fire is getting closer to him."

Also on Monday, the interim leader of the Syrian opposition's National Coalition, George Sabra, accused Hizbollah of declaring war against the Syrian people; as proof he said party members have fought against the rebels in the town of Qusayr, near the Lebanese border.

The obvious fragility of British credit

Moody’s Doesn’t Rate

By THEODORE DALRYMPLE

If the incompetence of the credit-rating agencies needed further proof, Moody’s recent downgrading of Britain would have provided it. It was not the downgrading that showed Moody’s incompetence, however; it was the high ranking that it had accorded Britain in the first place. Britain has been a bad long-term bet for years now. Anyone with the slightest instinct for economic affairs would long ago have foreseen the country’s poor outlook.

Indeed, a single speech in 2004 by Anthony Blair, the prime minister at the time, should have been sufficient to alert observers to the dangers. In the speech, Blair boasted that, after seven years in office, he had nearly doubled spending on public education and more than doubled spending on the National Health Service, Britain’s Soviet-style health-care system. He also promised that NHS spending would rise by another 50 percent over the next four years (a promise that, atypically, he kept). Though most of the money paid the wages of a growing number of government workers, Blair repeatedly referred to the spending increases as “investments.” So did Gordon Brown, his chief economics minister. Blair felt it unnecessary to provide evidence that this spending brought actual benefit, economic or otherwise, or to consider its possible costs. He spoke as if the money came from a generous extraterrestrial donor and not from higher taxes and government borrowing. A country with a government that cannot tell the difference between investment and expenditure is one from which lenders would best steer clear.

Three things might have alerted Moody’s, were it minimally competent. First, the government’s tax receipts did not cover its spending; even at the height of the booming 2000s, borrowing became necessary to make up the difference. Second, the boom itself was clearly the product of cheap credit, which led to asset inflation and overconfident private spending and borrowing. Finally, while taking on legions of new employees is easy for government, nothing is harder politically than to sack them when the money runs out. The means of meeting obligations disappear, but the obligations remain.

In other words, in an economic downturn—of the kind that Brown absurdly claimed to have banished forever—the whole house of cards would collapse. How could a company dedicated to evaluating credit not understand that? 

The Next Golden Age, Part II

The Next Golden Age will bloom once the high cost structures of the U.S. economy implode in insolvency

By Charles Smith

Yesterday, in The Next GoldenAge, Part I, I laid out why the Savior State and its sprawling fiefdoms (both domestic and global) are unsustainable and thus will inevitably devolve/collapse.

Based on the historical accidents of plentiful cheap energy, global dominance via the destruction or marginalization of competitors and favorable demographics, the Savior State and its global Empire arose to reach the present extremes of marginal return: treasure, blood and effort are thrown at "problems" even as the returns sink to negative territory.

Exponential growth of State revenues and debt (public and private) is unsustainable, yet the status quo will immediately implode without borrowing on a vast and rising scale (the Savior State currently borrows 11% of GDP every year, a sum sure to rise).

We can thus look forward to the demise of the entitlement mentality:

The entitlement mentality is a prison of resentment, self-absorption and complicity in the "project" of enlarging the Central State and its Power Elites' share of the resources, output, wealth and income of the nation and the world.

Now I would like to focus on the pragmatic result of marginal return and protected fiefdoms: an intrinsically high cost structure in the U.S. economy.

I have addressed this many times over the past few years:

Lowering the Cost Structure of the U.S. Economy (August 29, 2008)

Is Higher Education Worth a Lifetime of Debt? (August 26, 2009)

What Won't Be Changing (February 2, 2009)

This Week's Theme: The Coming Great Depression (November 24, 2008)

Has Capitalism Failed? (December 19, 2008)

The key dynamics of high cost structure are:

A. Marginal return: as the returns on investment plummet to zero, the status quo attempts to "solve" the "problem" by borrowing and throwing ever-larger sums of money at the "problem." Thousands of pages of legislation add more complex layers of bureaucracy to systems already groaning under a crushing complexity and resulting inefficiency. Returns soon drop to negative. 

B. Cost of borrowing rises: One way to think of this is to recall the physics of corn ethanol: consume a barrel of oil producing the ethanol and get 2/3 of a barrel of equivalent energy as a result. The 1/3 loss is filled by borrowed money, which masks the loss and shunts the burden forward, but with the added cost of interest. Thus marginal return which is cloaked by borrowing merely doubles the burden going forward: not only is good money being put after bad, but the money is borrowed, leaving futere taxpayers/citizens with an ever-rising burden of interest to service. The economy loses not just in the malinvestment but in capital and national income being diverted to pay interest on the money squandered in the misallocation/ malinvestment.

The Next Golden Age, Part I

The Next Golden Age will blossom without the burden of the Savior State and its Elites and fiefdoms

By Charles Smith

I recently received this insightful challenge to address the positive future that potentially lies beyond devolution and collapse:

Good morning sir, I love your writing I read it everyday. You focus so much on the coming collapse and not at all the inevitable rebirth and the beginning of the next 80-year cycle. Would you spend some time speculating about the new golden age beginning in 2021 or so? Your glass half empty pessimism is sometime overwhelming. Thank you,

                                              - Sgt C., U.S. Marines

Thank you, Sgt C., for suggesting the challenge of imagining not just collapse (all too easy) but a positive rebirth from the ashes of the present unsustainable status quo.

In a way, I've already tried to address this with my books, but with the focus on individual, household and community actions. What I will attempt in this occasional series is to describe future large-scale changes: financial, cultural and material.

1. The reduction of complexity and the end of marginal return. The chief characteristic of the U.S. economy and society is marginal return: ever-larger sums of money, energy, human effort, etc. are dumped into a "problem" while the return on that prodigious investment diminishes to less than zero.

The reasons are not complex: one is complexity itself, fed by entrenched fiefdoms protecting their payrolls and perquisites, the pernicious effects of the entitlement mentality and an organizational bureaucratic sclerosis which can be defined as a focus on process over results.

In the post-collapse-of-the-status-quo future, all the wasted motion will be lost. It will no longer be affordable, so it will go away.

Results will matter, process won't--the reverse of today's cultural worldview. Nowadays, by following procedure you CYA--protect yourself from criticism--and also evade responsibility for the outcome.

My favorite illustration of this may be apocryphal. Someone goes to Thomas Edison's laboratory and asks about the enterprise's regulations. "Regulations?" Edison is said to have retorted. "We're trying to get something done here." Precisely.

The ultimate luxury and waste is a CYA focus on procedure to avoid responsibility for poor results (or negative results). That luxury will be gone.

Let me illustrate the reduction in complexity and process with one example we can all relate to: going to the doctor. In the New Golden Age, everyone will pay for healthcare with cash. There may well be some limited forms of catastrophic coverage, but the entire mindset of entitlement ("healthcare is a right," etc.) will be gone.

You choose the doctor, and he/she agrees to offer care for a sum (just like in the "old Golden Era" of the 1950s). You receive the care/treatment, and then pay the doctor in cash or equivalent.

Currently, it is estimated 40% of the $1 trillion we spend on Medicare/Medicaid is squandered on shuffling paperwork/electronic files and fraud. Another 40% does not actually help the patient or is needless (defensive medicine, tests given for profit only, etc.). The opportunities for fraud in the sprawling bureaucracy are endless.

Now compare it to the Next Golden Age. Where is the opportunity for fraud when care is paid for in cash? A "bad check" slipped in lieu of real money? Perhaps, but in general the staggering waste and fraud of the current system vanishes.

How much of this transaction is "overhead," paper-shuffling, filing of insurance claims, arguing over who pays for what, etc.? Very little. If the doctor overcharges (i.e. charges more than other equivalent services) then his/her business will decline.

What about poor people who can't pay for care? In at least some cases, "poverty" is at root mismanagement, carelessness and perhaps a self-destructive worldview. These people will either learn to manage their money better or they will have to wait for whatever care is offered by charity.

Reinhart and Rogoff Were Wrong Even Without the 'Spreadsheet Error'

They forgot that we’re all individual microeconomists, and so long as governments stay out of our way, we’ll be productive

By John Tamny
Though Kenneth Rogoff has written some fairly obtuse op-eds over the years, the book he co-authored with Carmen Reinhart, This Time Is Different, was very much a worthwhile read. If their Keynesian, Phillip’s Curve ideology is ignored, they offered some really interesting statistics.

Most useful to this reader was their soberly introduced point that Greece has been in default half of its modern existence. About government defaults more broadly, they similarly clarified that they’re rarely an all or nothing thing, rather they generally involve slight ‘haircuts’ for creditors. And while they didn’t tie this to modern times, they made the essential point that the U.S. Treasury has defaulted on its debt before; specifically in the 1930s when the dollar’s gold value was reduced to 1/35th of an ounce from 1/20th.

As many are aware, Reinhart and Rogoff made the news for an unfortunate reason last week, all due to a ‘spreadsheet error’ committed in the writing of their much quoted book. They’d found that when debt rose above 90% of GDP some sort of ‘tipping point’ was reached whereby country growth slowed down after the 90% line was crossed. But now it seems their calculations weren’t correct; that heavy country debts of the 90% variety don’t correlate with ‘malaise’ in any statistically significant way.

Quite predictably, reliably delusional Keynesians have taken the above news and concluded that Reinhart and Rogoff’s calculations needlessly caused massive global unemployment. Despite government spending always occurring at the expense of private sector outlays, Keynesians persist in their juvenile view that it’s more economically stimulative for governments to waste money over it being lent out or invested by profit-motivated individuals. Unsurprisingly, they took the news as vindication of their comically sad belief that politicians can spend us to prosperity with money taxed and borrowed from us first.

Human ingenuity and natural resources

Let’s not forget to celebrate the human resources — knowledge, ingenuity, know-how, creativity, entrepreneurship, and imagination

by Mark J. Perry 

On Earth Day “events are held worldwide to increase awareness and appreciation of the Earth’s natural environment.” As we observe Earth Day this year, it might be a good time to appreciate the fact that Americans get most of their plentiful, affordable energy directly from the Earth’s “natural environment” in the form of fossil fuels (coal, natural gas, and petroleum). It’s largely those energy sources that fuel our vehicles and airplanes; heat, cool, and light our homes and businesses; and power our nation’s factories and raise our standard of living. Shouldn’t that be part of “increasing our awareness and appreciation of Earth’s natural environment” — to celebrate Mother Earth’s bountiful natural resources in the form of abundant, low-cost fossil fuels?

The chart above illustrates the importance of the Earth’s hydrocarbon energy treasures to America — in the past, today, and in the future. Over almost a one-hundred year period from 1948 to 2040, fossil fuels have provided, and will continue to provide, the vast majority of our energy by far (based on Department of Energy data here, here and here). Last year, fossil fuels provided almost 84% of America’s energy, which was nearly unchanged from the 85% fossil fuel share twenty years ago in the early 1990s. Even more than a quarter of a century from now in 2040, the Department of Energy forecasts that fossil fuels will still be the dominant energy source, providing more than 80% of our energy needs. So, despite President Obama’s dismissal of oil and fossil fuels as “energy sources of the past,” the Department of Energy’s own forecasts tell a much different story of a hydrocarbon-based energy future where fossil fuels serve as the dominant energy source to power our vehicles, heat and light our homes, and fuel the US economy.

Energy fact of the day

US CO2 emissions per capita in 2012 were the lowest since 1964

By Mark J. Perry 

It’s been widely reported here and elsewhere that CO2 emissions in the US have been falling pretty dramatically over the last five years, thanks in large part to the substitution of natural gas for coal to generate electricity in the US. Natural gas is much more environmentally friendly than coal, which emits about twice as much CO2 as gas when used for electricity generation. Last year, CO2 emissions in the US fell to an 18-year low, the lowest level since 1994, and C02 emissions from coal fell to a 26-year low, the lowest since 1986. Further, as the WSJ reported this week (“Rise in U.S. Gas Production Fuels Unexpected Plunge in Emissions“) the US now leads the world in reducing CO2 emissions thanks to the shale revolution. At the same time that America is using less coal and more shale gas and reducing C02 emissions, Europe and Asia are becoming more coal-dependent for electricity generation, and increasing C02 emissions.

Compared to the last time that CO2 emissions were at 2012′s levels — back in 1994 — real GDP in 2012 was 55% higher and the US population was 17.5% larger, making the drop in greenhouse gas emissions to an 18-year low in 2012 even more impressive. Adjusted for the population, CO2 emissions per capita last year were the lowest since 1964, almost 50 years ago (see chart above, data here and here). According to Department of Energy forecasts, the decline in per capita CO2 emissions is expected to continue so consistently that within about 20 years, greenhouse gas emissions per person in the US will be below the level in 1949!

Health Be Damned

Denmark Hopes Cheaper Soda Will Boost Economy

High value-added taxes and easy border access have long drawn Danish consumers to German grocery stores. Now, the government in Copenhagen hopes that repealing a tax on soft drinks and beer will reduce cross-border shopping and boost the domestic economy.

The Danish government is abandoning a beverage tax that it says is costing the country millions of euros as consumers cross the border to shop in Germany instead.

The tax on soft drinks is to be halved by July and completely abolished by next year, making a 1.5-liter bottle of soda three kroner (€0.40) cheaper in the end. The lesser tax on beer is to be cut by 15 percent by July.

Finance Minister Bjarne Corydon told public broadcaster DR on Monday that the tax's repeal, which has broad support in parliament, would provide a "powerful growth spurt" to the Danish economy.

Cross-border shopping is nothing new to Denmark, as many goods have long been more affordable in Germany and much of the population lives a short trip away from Schleswig-Holstein, Germany's northernmost state. However, the tax on soft drinks and beer, implemented to encourage healthier drinking habits, dramatically increased the traffic.

A report commissioned by the Danish grocers' association DSK last year found that 57 percent of Danish households had crossed the border into Germany to buy beer or soft drinks over the past year -- the highest number ever measured in the regularly conducted study.

Germany’s Trial Balloon Of A “Plan B”

Each country would be exclusively responsible for its own debts, and not the debts of other countries

By Wolf Richter   

Some prominent Germans have publicly expressed their doubts about the future of the euro. A few politicians have tried to jam anti-euro sound bites edgewise into the evening news. And an anti-euro party, the Alternative for Germany, is forming just in time for the September elections, hoping to garner enough votes to move into parliament.

But those close to the epicenter of power, those near Chancellor Angela Merkel, have to toe the line. And the line is that the euro is far more than just a currency, that it’s a sacred concept, a sort of religion worth saving no matter what the costs. Even much of the opposition toes that line. While the possibility that a small country might exit the euro has been accepted more or less, the euro itself has been inviolable in those circles. Until now.

“I give the euro medium-term only a limited chance of survival,” said Prof. Dr. Kai A. Konrad,Chairman of the Council of Scientific Advisors to the Ministry of Finance, an advisory body to that epicenter of power. In his day job, he is Director at the Max Planck Institute for Tax Law and Public Finance. In an interview published in the Welt, he floated a trial balloon, an alternative, a heresy for Germans, a grand compromise of sorts, an exit strategy if you will, a way out of the crisis for every country in the Eurozone, a Plan B whose very existence the government has strenuously denied.

Could Bitcoin be the money of the future?

Unelasticity is Bitcoin’s greatest strength and true genius

by DETLEV SCHLICHTER

The crypto-currency Bitcoin is still merely a speck on the global monetary landscape. It is young, experimental, and for all we know, it may ultimately fail to break into the monetary mainstream. However, on a conceptual level I am willing to call it a work of genius and arguably the most exciting development in the field of money for more than 130 years. Let’s say since the start of the Classical Gold Standard in 1879. Does this sound like hyperbole? Well, let me explain.

The Decline and Fall of Capitalist Money

The 20^th century was, broadly speaking, a period of almost constant monetary decay. At around 1900 most economists, politicians and bankers would have correctly stated that global capitalism – an international market economy facilitating the free exchange of goods and services across political borders and thus allowing extensive human cooperation through trade – required an international, apolitical, and hard form of money. Such money was gold. It was the basis of the capitalist economy and it imposed strict discipline on all market participants. Crucially, that included governments and banks. Governments had to operate pretty much like private businesses. They had to balance their books, i.e. live within the means provided by taxation, and if they borrowed money in the marketplace their lenders were at full risk of default as no government could print money (gold) to repay loans or even meet interest payments on loans. Banks, of course, issued banknotes or bank-deposits that were not backed by gold but still used by the public as if they were money proper – these were and still are ‘money-derivatives’ – but again they did so at full risk of default as nobody could ‘print’ bank-reserves (gold again) to bail out the banks in case the public tired of the ‘derivatives’ and wanted to hold gold instead.

The Last Man in Russia: The Struggle to Save a Dying Nation

Inside the soul of a drunk and bitter country

By Peter Pomerantsev

Dmitry Dudko wanted to be a priest in a violently atheistic Soviet Union. When the KGB came to arrest him in 1948, they demanded he recant poems denouncing Stalin. “I won’t sign anything,” he told them. “I spoke the truth.” He got 10 years’ hard labor in the freezing mines of the far north. In the gulag he continued to pray, continued to write, continued to insist that Christ’s law was higher than the Kremlin’s. He was given another 10 years. When he was finally released, he began to preach in a cemetery on the outskirts of Moscow. He spoke against the state’s attack on the family, chastised the Orthodox establishment for toadying to the Kremlin, denounced the KGB for destroying communities by making men report on one another, taught Jews and Russians and Tatars to huddle together in faith and hope and overcome their ethnic bitterness.

In the 1970s, in a late Soviet period defined by endless cynicism and conformism, when no one believed in anything (least of all communism) and submission to the Kremlin for the sake of submission became the essence of the system, Dudko became legendary. Thousands would come to his sermons. Foreign correspondents were so inspired by him, they smuggled Dudko’s works out of the U.S.S.R., and his fame spread throughout the world. He became a beacon of anti-Soviet dissidence, a religious Solzhenitsyn, a free man in a totalitarian system. In 1980 he was arrested again. This time the KGB’s approach was more subtle: “we are guilty before you, and the state is guilty before the church,” they told him; they agreed that Russia needed to find faith; they hinted that they were believers just like him; they blamed all the bad bits of communism on the Jews. Wasn’t it time for us Russians to stick together? They said they would give him a chance to preach to a much greater audience if only he would do one tiny, little thing for them.

The Poverty Lie

How Europe's Crisis Countries Hide their Wealth

By SPIEGEL

How fair is the effort to save the euro if the people living in the countries that receive aid are wealthier than the citizens of donor countries like Germany? A debate over a redistribution of the burdens is long overdue.

The images we see from the capitals of Europe's crisis-ridden countries are confusing to say the least. In the Cypriot capital Nicosia, for example, thousands protested against the levy on bank deposits, carrying images of Hitler and anti-Merkel signs, one of which read: "Merkel, your Nazi money is bloodier than any laundered money."

German Chancellor Angela Merkel was greeted by a similar scene when she visited Athens in October 2012. An older man with a carefully trimmed moustache and pressed trousers stood in Syntagma Square. The words on the sign he was carrying sharply contrasted with his amiable appearance: "Get out of our country, bitch."

Despite these abuses, the protesters and all of Merkel's other critics in Rome, Madrid, Nicosia and Athens agree on one thing: Germany should pay for the euro bailout, as much as possible and certainly more than it has paid so far.

They argue that Germany is a rich country that has benefited more than all others from the introduction of the euro, and that it has flooded other European countries with its exports, becoming more prosperous at their expense.

Germans Own Less than Those Asking for Money

But there is also a second image of Germany, one that's based on numbers, not emotions. The figures were obtained by the European Central Bank (ECB) and released last week. This image depicts a country whose households own less on average than those that are asking for its money.

In this ranking of assets, Cyprus is in second place Europe-wide, while Germany ranks much lower, even lower than two other crisis-ridden countries, Spain and Italy.

And this Cyprus, with its affluent households, is now supposed to receive €10 billion ($13.1 billion) from the European Stability Mechanism (ESM), the Euro Group's permanent bailout fund, and the International Monetary Fund (IMF), at least according to the decisions reached after dramatic negotiations, which the German parliament, the Bundestag, is expected to approve this week. But a new question is arising: Why exactly are we doing this? Isn't Cyprus rich enough to help itself?

Why can't the IMF face up to the truth about the failing euro?

How sad it is that in order to get yourself admitted to hospital you have to shoot yourself in the foot first

By Jeremy Warner

I've been in Washington most of this week for the spring meeting of the International Monetary Fund. I wish I could say there was light at the end of the tunnel, but the reality is still deeply depressing. Sorry to use cliches, but two sayings spring to mind: fiddling while Rome burns, and re-arranging deck chairs on the Titanic.

In "The Economic Consequences of the Peace", the British economist, John Maynard Keynes, wrote that his preference in any negotiation or arbitration was for "violent and ruthless truth telling" but there has been very little evidence of that in this week's discussions. Instead of addressing the underlying causes of today's economic funk – the failing euro – debate has focused on marginal fiscal and monetary issues such as whether the UK and the US are consolidating too fast.

That the IMF's chief economist, Olivier Blanchard, and his managing director, Christine Lagarde, could think some minor loosening of the fiscal purse strings in the UK either appropriate or capable of getting growth going again, when there is such a deep seated crisis going on in Europe is not just odd, it is pitiful. I've already written about the wider failings of the IMF in confronting the worst economic crisis since the second world war , but there is a lot more to say about it.

Instead of forcing eurozone leaders to face up to the truth – that their project in its present form is failing not just them, but the whole world economy – the IMF busies itself with irrelevances such as whether the UK has the fiscal space for a little more debt fuelled demand management. Worse, it meakly goes along with attempts to sustain what is plainly in its current form a completely unsustainable endeavour.

One of the big "puzzles" under discussion this week at the IMF is why the massive degree of monetary stimulus applied to advanced economies over the past four years has gained so little traction. I would have thought the answer was obvious. You can have as much demand management as you like, but as long as underlying imbalances in the world economy go unaddressed and unresolved, companies and households are not going to have the confidence to spend and invest.

We are all Alexandrians now

Remembering Lawrence Durrell, Predictor of our Postmodern World

by Peter Pomerantsev 

Not Joyce, not Kafka, not Proust, not Pasternak, not Garcia Marquez, not Bellow. The most important 20th-century novelist for a 21st-century reader could well be Lawrence Durrell. This year celebrates the centenary of his birth. Next to nothing is taking place to celebrate it. But Durrell, whose best work came in the late 1950s and early 1960s, was the first to explore the poetry and puzzles of life in an era of globalization (a clunky term Durrell would have improved on), hyphenated identities, perpetual movement. “I think the world is coming together very rapidly,” he said in an interview in 1983, “so that within the next fifty years one world of some sort is going to be created. What sort of world will it be? It’s worth trying to see if I can’t find the first universal novel. I shall probably make a mess of it—but we shall see.”

The city at the center of his masterpiece, The Alexandria Quartet, is the prototype of the global village, of the smudged meta-city we increasingly inhabit. Published between 1957 and 1960, the Quartet is a series of interlinked novels set in Alexandria preceding and during World War II, but it’s uncanny how its political disorder anticipates our own. The Alexandria of the Quartet is run with an ever-weaker hand by Western powers losing their will to rule, and is ever-more dominated by ambitious but corrupt emerging nations, influenced by deracinated tycoon financiers, stirred on the streets by Islamic “nightmare-mystics, shooting out the thunderbolts of hypnotic personal-ity.” The state of Israel, off-stage but central to the plot, divides loyalties to the point of death and tragedy. The Quartet is an exceptional political thriller: imagine John Grisham rewritten by Joyce.

“Five races, five languages, a dozen creeds: five fleets turning through their greasy reflections behind the harbor bar,” writes Durrell. “Turks with Jews, Arabs and Copts and Syrians with Armenians and Italians and Greeks. The shudders of monetary transactions ripple through them like wind in a wheat-field ... this anarchy of flesh and fever, money-love and mysticism. Where on earth will you find such a mixture!”